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brownsfan019

A Look at a Stock Trader's Day

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There are some great posts in the P/L thread, but it's easy for stuff to get lost.

 

This post from Thalestrader is a look at how a stock trader structures his day. I wanted to highlight this post b/c Thales constantly cranks out impressive numbers on the p/l thread.

 

I asked Thales how he sets up his day since the universe of stock is so large. His response was:

 

1) I trade S & P 500 stocks only, except for an occassional IBD 100 stock.

 

2) I monitor the 10-12 biggest gainers and losers on a percentage basis. I use the biggest gainers for long candidates and biggest losers for short candidates.

 

3) I select trades based upon support/resistance, chart patterns etc.

 

4) All trades are based on decisions made watching the 5 minute chart.

 

5) I use no indicators other than I do from time to time place a 20 EMA on the 5 minute chart. I will sometimes use pullbacks to the 20 EMA to buy/sell short.

 

So I am usually watching just 20 stocks, though I have the whole SP500 list on my screen. I simply scroll down through the top 10-12 gainers, and then I click on the %change column, and the watchlist reverses so that the biggest losers are now at the topof the list. I scroll down through the top 10-12 biggest losers. That is how I narrow the universe of stocks down.

 

When I am scrolling through the 10-24 stocks that comprise the biggest winners/losers of the moment, I am looking for potential breakouts from consolidations, flags/pennants, etc. As an example, I re-attached the CME chart from today. I was a buyer in the area highlighted within the green ellispse. As I always say, nothing fancy.

 

Also, you will see that I included my watchlist in the screenshot.

 

Best Wishes,

 

Thales

 

10699d1242250283-trader-p-l-2009-5-13-2009-cme-sp500-list1.jpg

 

 

 

We don't have many stock traders here that post, but Thales was kind enough to give a look into his day.

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Simple, straightforward, and elegant in its own way. I like how Thales is very focused on a limited number of things. Good lessons for us all. Thanks for making this a separate post, BF.

 

Eiger

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No problem Eiger.

 

I also liked how he narrows his universe of stocks rather quickly and simply by looking for the stocks that are on the move. If I was to trade stocks again, that would be the approach I would take as well - look for the ones moving on the day and ride them as long as you can.

 

That is one major advantage of trading stocks vs. futures. With futures, you are 'stuck' in the market(s) that you watch whereas in stocks you can go where the action is. For example, there are plenty of days where the ES/NQ is doing nothing - almost flat-lining. During that same time, there's a good chance a handful of stocks are on the move for the day.

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That is one major advantage of trading stocks vs. futures. With futures, you are 'stuck' in the market(s) that you watch whereas in stocks you can go where the action is. For example, there are plenty of days where the ES/NQ is doing nothing - almost flat-lining. During that same time, there's a good chance a handful of stocks are on the move for the day.

 

Another advantage trading stocks has over futures is that it is often easier to maintain a strict risk profile as stocks offer more flexible position sizing than futures do.

 

A disadvatage is that profits from short term stock trades are taxed treated as short term gains for tax purposes, whereas futures trading profits receive the far more favorable 60/40 treatment.

 

Another disadvantage of stock trading over futures is that the SEC, in its infinite lack of wisdom, has barred the trader with a small capital from day trading stocks. Instead, the trader with limited capital has to trade e-mini's where the leverage on a $500 day trade margin is quite high.

 

Gone are the days when Wyckoff could advise one with a mere thousand dollars in risk capital to learn to read the tape trading in 10-50 share lots.

 

Best Wishes,

 

Thales

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....

Another disadvantage of stock trading over futures is that the SEC, in its infinite lack of wisdom, has barred the trader with a small capital from day trading stocks. Instead, the trader with limited capital has to trade e-mini's where the leverage on a $500 day trade margin is quite high.

 

Gone are the days when Wyckoff could advise one with a mere thousand dollars in risk capital to learn to read the tape trading in 10-50 share lots...

 

 

It's amazing how they view emini futures vs. stock. I guess they must be (over) worried about the corporate risk in the equities.

 

One way around the poor leverage is long, deep ITM options. This is a better solution for swing traders as you can day trade only a very limited number of option contracts at the moment. But more and more are becoming tradable on the intraday especially over the last 2-3 years. Something to keep an eye on.

 

Really nice work Thales - great to see the high quality thinking in your trading.

 

Eiger

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so if i trade stocks by adding liquidity, is it less costly to trade stocks?

 

thanks

 

I'm sorry, but I am not at all sure that I understand what it is you are asking, so I cannot answer your question.

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hey Thales

 

i've never traded stocks before..

 

so if i trade stocks by adding liquidity, is it less costly to trade stocks?

 

thanks

 

If you're asking whether or not you get lower commissions for trading more volume, the answer is yes.

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I asked Thales how he sets up his day since the universe of stock is so large.

 

 

Hi Folks,

 

For anyone interested in freestockcharts.com, the software I use for intraday charting, I just received an email from them with the following link to some videos on how to use the software.

 

FreeStockCharts.com Videos

 

Best Wishes,

 

Thales

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Stock trading looks interesting. But how do you protect against stocks getting halted? What if you are trading a top loser, it gets halted, and opens back up much higher than before? That could be very costly with a day trading position.

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Abe - that is present in any instrument being traded. It's rare, but could happen whether in stocks or futures. I suppose if you are trading a big % loser on the day you might want to be nimble w/ your profits but not sure how often that occurs to be concerned about it.

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Stock trading looks interesting. But how do you protect against stocks getting halted? What if you are trading a top loser, it gets halted, and opens back up much higher than before? That could be very costly with a day trading position.

 

The scenario you suggest could indeed happen - you could be short a stock that is halted and re-opens higher, or you could be long a stock that is halted and re-opens lower. However, I think that so long as you are only shorting stocks moving down on higher than usual volume and only going long stocks that are moving up on heavy volume, then the chances of being on the wrong side such a surprise is remote. These stocks are moving in those directions for a reason, and that reason is that whatever news pending that is going to cause trading to be halted is already moving those stocks in the direction to which they will respond to the news once the rest of us become privy to it.

 

I have had two stocks halted on me over the years, and in each case I was on the right side of the market. In each case, the news pending that caused trading in these stocks to be temporarily suspended was likely already known by some of the larger institutions - hence these stocks were already being bought or sold heavily prior to being halted.

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Abe - that is present in any instrument being traded. It's rare, but could happen whether in stocks or futures. I suppose if you are trading a big % loser on the day you might want to be nimble w/ your profits but not sure how often that occurs to be concerned about it.

 

But in index futures if your instrument gets halted you can hedge your position by trading in another similar instrument. This can't be done with a stock that is halted on stock specific news.

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The scenario you suggest could indeed happen - you could be short a stock that is halted and re-opens higher, or you could be long a stock that is halted and re-opens lower. However, I think that so long as you are only shorting stocks moving down on higher than usual volume and only going long stocks that are moving up on heavy volume, then the chances of being on the wrong side such a surprise is remote. These stocks are moving in those directions for a reason, and that reason is that whatever news pending that is going to cause trading to be halted is already moving those stocks in the direction to which they will respond to the news once the rest of us become privy to it.

 

I have had two stocks halted on me over the years, and in each case I was on the right side of the market. In each case, the news pending that caused trading in these stocks to be temporarily suspended was likely already known by some of the larger institutions - hence these stocks were already being bought or sold heavily prior to being halted.

 

What about this scenario: A stock moves on heavy volume based on a false rumor, you place a day trade, but stock is halted, and you have no way to hedge your position. Then the real news comes out and stock reopens against you, triggering your stop, but at greater loss than you planned for. I wonder how bad could this loss be? Could it reopen 20% or more against you? That would be a huge loss if you have a day trade in place. Even 5% could be huge. Do you look into the fundamentals of a high volume move to see, for example, if it is based on a rumor or fact?

Edited by AbeSmith

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Do you look into the fundamentals of a high volume move to see, for example, if it is based on a rumor or fact?

 

No. I have no access to news during before and during trading hours.

 

It is just me, my charts, and my trading platform.

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But in index futures if your instrument gets halted you can hedge your position by trading in another similar instrument. This can't be done with a stock that is halted on stock specific news.

 

Why can't you do the same thing with a stock? You can hedge it with another stock in the same industry, or with a ETF. Bottom line, trading has risks. If you are not comfortable with the risks, then don't do it.

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Why can't you do the same thing with a stock? You can hedge it with another stock in the same industry, or with a ETF. Bottom line, trading has risks. If you are not comfortable with the risks, then don't do it.

 

You can't hedge a stock if the news that caused it to halt is stock specific. Then you are stuck with a day trading position on a halted stock, the stock reopens against your position, and you had no way to hedge against it. What if that stock reopens 5% against your day trading position that is designed to take less than 1% loss? Your stop loss will get filled at that 5% level because it gapped up against you, not at the .3% where you placed your stop loss. Could it reopen 10 or 20% or more against you?

 

That's why I asked thales if he knew how badly a halted stock can open against your position. Probably he doesn't know or is not saying for some reason. So yeah, ofcourse I'm not comfortable with trading stocks if I don't know this important information, which thales failed to answer, and you are not helping to answer, but instead giving me ultimatums that I should not trade stocks if I'm not comfortable with the risk. Well that's what I'm trying to find out. And I wonder why thales thanked your stupid ultimatum reply to me? Very fishy of thales.

Edited by AbeSmith

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You can't hedge a stock if the news that caused it to halt is stock specific. Then you are stuck with a day trading position on a halted stock, the stock reopens against your position, and you had no way to hedge against it. What if that stock reopens 5% against your day trading position that is designed to take less than 1% loss? Your stop loss will get filled at that 5% level because it gapped up against you, not at the .3% where you placed your stop loss. Could it reopen 10 or 20% or more against you?

 

That's why I asked thales if he knew how badly a halted stock can open against your position. Probably he doesn't know or is not saying for some reason. So yeah, ofcourse I'm not comfortable with trading stocks if I don't know this important information, which thales failed to answer, and you are not helping to answer, but instead giving me ultimatums that I should not trade stocks if I'm not comfortable with the risk. Well that's what I'm trying to find out. And I wonder why thales thanked your stupid ultimatum reply to me? Very fishy of thales.

 

You seriously expect anyone to be able to tell you exactly how much a stock can trade against you when halted? Really?

 

BTW, this was not an ultimatum; Just common sense...

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What about this scenario: A stock moves on heavy volume based on a false rumor, you place a day trade, but stock is halted, and you have no way to hedge your position. Then the real news comes out and stock reopens against you, triggering your stop, but at greater loss than you planned for. I wonder how bad could this loss be? Could it reopen 20% or more against you? That would be a huge loss if you have a day trade in place. Even 5% could be huge. Do you look into the fundamentals of a high volume move to see, for example, if it is based on a rumor or fact?

 

The point is Abe is that you CAN hedge your position. Sevensa told you how - you can buy/short similar stocks or a market ETF or a market futures contract.

 

So let's say you are short RIMM and it halts. If you are panicked, you could go long the NQ, long a Nasdaq based ETF or a stock similar to RIMM. Is it perfect? Probably not but there are options to hedge the position.

 

Same thing if the CME goes down (which a few years ago was happening routinely it seemed) - you could hedge w/ an ETF, but it won't be perfect either.

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The point is Abe is that you CAN hedge your position. Sevensa told you how - you can buy/short similar stocks or a market ETF or a market futures contract.

 

So let's say you are short RIMM and it halts. If you are panicked, you could go long the NQ, long a Nasdaq based ETF or a stock similar to RIMM. Is it perfect? Probably not but there are options to hedge the position.

 

Same thing if the CME goes down (which a few years ago was happening routinely it seemed) - you could hedge w/ an ETF, but it won't be perfect either.

 

Nonsense. One reason people trade ETFs is to protect against company specific bad news. So they buy the whole sector incase the specific stock has some bad news. If youre trading that stock and it gets halted, the ETF will not be a good hedge.

 

But with index futures they indexes follow eachother very closely. If one index is down you can either buy the etf, or a similar index. That's a much better hedge than buying the sector of a stock that got halted on stock specific news.

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Lol .......... ..........

 

no, you cannot hedge company specific news.

but you can hedge...

if you chose not to hedge,

or if you decided that nothing is good enough as a hedge,

then do like s said... don't trade,

which is what you have already stated anyway...

that's the decision you have made,

and that's the decision i have made too...

great!

we are all in agreement

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You seriously expect anyone to be able to tell you exactly how much a stock can trade against you when halted? Really?

 

BTW, this was not an ultimatum; Just common sense...

 

No. YOu seriously believe I expect to know exactly how much a stock can trade against me when halted? All I asked was CAN it reopen 5%, 10%, or 20% against me? That is what I, and anyone with common sense, which you obviusly lack, should know before they risk their money on day trading stocks.

 

Yet the only replies I got so far from you is, don't risk your money on stocks if you're not comfortable with the risk. I'm trying to figure out the risk. How much CAN a halted stock reopen against me?

 

It is in bold now to help. But obiously you are just a troll and don't know the answer, so don't waist peoples time with your stupid replies. And thales clearly either doesn't know is avoiding the question.

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Lol .......... ..........

 

no, you cannot hedge company specific news.

but you can hedge...

if you chose not to hedge,

or if you decided that nothing is good enough as a hedge,

then do like s said... don't trade,

which is what you have already stated anyway...

that's the decision you have made,

and that's the decision i have made too...

great!

we are all in agreement

 

I'd like to know how severly can a halted stock move against me when it reopens. And anyone with even half a brain should be wondering the same thing. Technically it can move 100% or more against you. That is not what I'm asking. I want to know, has anyone seen a halted stock reopen 5%, 10%, or 20%? What if you got a day trade on a stock, it gets halted, and reopens against you that much, that would be a huge loss if you only plan to lose .3% for example. And that is very scary thing about stocks so I'm trying to figure out how likely is that, and are there ways to protect against it.

Edited by AbeSmith

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I'd like to know how severly can a halted stock move against me when it reopens. And anyone with even half a brain should be wondering the same thing. Technically it can move 100% or more against you. That is not what I'm asking. I want to know, has anyone seen a halted stock reopen 5%, 10%, or 20%? What if you got a day trade on a stock, it gets halted, and reopens against you that much, that would be a huge loss if you only plan to lose .3% for example. And that is very scary thing about stocks so I'm trying to figure out how likely is that, and are there ways to protect against it.

 

 

it can also re-open in your favor.

 

;-)>

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